There are nearly 50 countries that have a national tax on vaping products, targeting liquid as the tax base. The UK government has recently published a consultation which sets out proposals for how vaping products duty will be designed and implemented. It is now seeking views on the impact of these proposals to help determine the final design of the duty. If this is legislated, it means that vaping products will be treated in the same way as cigarettes and alcohol. Vaping products will be taxed and will therefore need to be stored in a bonded warehouse. Any movements into and out of the warehouse will need to be strictly controlled, to ensure that all the duties payable can be accounted for.

Keeping a detailed audit trail of bonded inventory in a warehouse with spreadsheet reporting will be extremely time consuming and it is also prone to errors. Where HMRC is involved, you don’t want to be making any mistakes, as any shortfalls in tax or reporting errors could result in a penalty charge.

How a WMS can support a bonded warehouse

One good way to keep tight control of bonded warehouse operations is with a warehouse management system (WMS). This benefits everything from cashflow to cycle counting, as this article explains.

An immediate boost to cash flow levels

Using a WMS will significantly improve cashflow because vape goods can be stored in the warehouse and any duties will only become payable when the goods are actually sold on. Many of the most popular vape brands are imported into the UK and a bonded warehouse means import duties can be waived while the items are sitting in a warehouse and will only become due when a wholesale customer orders them.

Automated reporting for bonded warehouses

Bonded warehouses need very detailed reporting showing stock movements, often across hundreds of different SKUs and customer locations. WMS software will automatically keep track of all the inventory entering and leaving the four walls, making this much easier to track. Being independently controlled by a software system also means the traceability is much tighter and because the system comes pre-configured with inventory reporting, any information submitted to compliance regulators like HMRC will be irrefutable.

Eliminate admin and manual paperwork

Using a WMS also helps to minimise warehouse management costs, by eliminating time-consuming paper administration. This ensures that the amount of duty paid is accurate, that it is only paid when it needs to be, that there is no stock shrinkage and that no reporting errors have occurred.

See ongoing financial returns

Investing in a WMS will deliver a rapid return on investment often within 12 months, but in the long term, the benefits are even greater. Other Indigo Software customers using a WMS in their bonded warehouse have shared that their investment saved tens of thousands of pounds in the first year alone, through time saved on ongoing stock checks. In addition, they have continued to save money, as a result of seeing further operational efficiencies from avoiding errors on orders. Over time, these savings will multiply year on year.

What are you waiting for?

The consultation into whether vaping products duty is still underway and there’s no guarantee that it will result in new legislation. We have a general election coming up very soon and who knows what the future will bring. But there are two things you can be pretty certain of. Firstly, vaping products will be an easy target for increased tax, regardless of which political party is in power.

Secondly, there is a well known saying among tax accountants… “never let the (tax) tail wag the dog” and this applies here. Simply waiting for potential new tax legislation to be passed before deciding whether to invest in a WMS doesn’t make commercial sense. WMS software has transformed operational efficiency in warehouses right across the world. Your warehouse is no different and could be benefiting immediately.

To find out how Indigo WMS could transform your warehouse contact us.

Disclaimer: This blog does not constitute tax advice. Tax law is complex so speak to an appropriately qualified specialist about the relevance and appropriateness of bonded warehousing for your business.